What Trends will Reshape Our industry? B. Hudson Riehle has Answers

At the upcoming VIBE Conference, the NRA's numbers man will shed light on how technology, Millennials and competition are changing the industry.

As senior vice president of the National Restaurant Association’s Research and Knowledge Group, B. Hudson Riehle directs consumer, economic, market, human resources, tourism and operations research. He also oversees the NRA’s Knowledge Center, which provides information services to restaurant operators and researchers.

At the upcoming VIBE Conference (February 26 to 28, San Diego), Riehle will look at the ways the U.S. restaurant market is evolving into a $799 billion mega-industry, spanning dozens of distinct segments—from table service and quick service restaurants to institutional and military foodservice, along with non-traditional locations and bars. A convergence of rapidly moving trends in technology, consumer demographics, labor-force composition, food, alcohol and economics is reshaping the historical restaurant model and altering future foodservice, supplier and alcohol markets.

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New data from the National Restaurant Association will offer strategic insights into the restaurant industry’s unique opportunities and challenges in meeting a growing demand for food and alcohol prepared away from home.

VIBE: Let’s start with how current economic factors are affecting bars and restaurants.

B. Hudson Riehle: In the restaurant industry, sales growth post-recession is definitely more moderate than prior to the recession. Growth continues to be positive but this is definitely a situation where the typical restaurant and bar owner has to work harder to achieve the same sales gains as a decade ago.

It’s a much more competitive environment and hence the increased importance in standing out. There are more than one million food service locations across the country and that increases even during soft economic times at about one percent a year on a net basis.

VIBE: Do American consumers have all the outlets they need, is that it?

Riehle: When you survey American consumers today there remains a sizable pent up demand. When you ask them if they are using restaurants and takeout as much as they would like in their daily lifestyle, about 40 percent say they are not. Demand has definitely remained elevated in the post-recessionary environment. So, locations continue to grow and consumers want to use food service more but the overall economic environment remains moderate. So, competition not only for market share but more importantly competition to get those dollars into the food service arenas is high.

Ten years ago, we used to talk about competition between bar and restaurant operations, and now they are somewhat in competition with other consumer spending. Transportation and housing, for example, accounts for 50 percent of all consumer spending—that makes things like loyalty programs and marketing and promotion more important because it’s a battle to get that consumer dollar into the food service arena and down to a specific location.

VIBE: But overall, things look positive.

Riehle: If you look at all restaurant spending in America today, it’s roughly an $800 billion market and 2018 will be the ninth consecutive year of positive growth for the industry, but that growth will definitely be more modest than previous decades.

VIBE: What about competition—from supermarkets or breweries—that serve food?

Riehle: We track sales in 70 different segments of the food service and hospitality industry. The legacy of the industry is extremely flexible and adaptable to the consumer’s needs. You can find bar and restaurant experiences that haven’t changed in 50 years, as well as brand-new things like on-site brewery experiences.

The fundamental shift of spending from home to away from home is driving the market and it’s not only important in growing the market but for the future. On the food side, the delivery component is important, and some operators and municipalities are experimenting with alcohol delivery. It’s very high value from a consumer perspective to order a restaurant-prepared meal and have alcohol accompany that order; that will be an important area of growth. Like with food trucks, some municipalities embrace it and others don’t pursue it but in the end, one thing is true about the hospitality industry—that what the consumer wants comes to fruition and there is definitely a pent-up demand for delivery of alcohol.